Global value chains (GVCs) clearly promote trade and investment but their impact on domestic value-added is less clear. This column discusses new evidence showing that GVCs participation stimulates domestic value, but not for all nations. It is necessary for low- and middle-income countries to increase their absorptive capacities if they are to reap benefits from GVC participation.
Transport costs fell precipitously during the last century leading many observers to posit that the world has ‘become flat’. If this were true, the costs of transporting goods should no longer have much bearing on firms’ location choices and the spatial structure of economic activity. This column, using manufacturing data for Canada from 1990 to 2008, argues that despite a decline in geographical concentration of industries, location patterns still change with fluctuations in transport costs.
In a global financial system, macroprudential policies may create international spillovers. This column presents new evidence on how the organisational structure of a bank affects the magnitude of these spillovers. An increase in capital requirements at home causes foreign branches to reduce their lending growth to other banks operating in the UK more than foreign subsidiaries do. Seemingly, this is because branches are an integral part of the parent company.
There were 24 sovereign defaults and debt restructurings between 1997 and 2013. Using data on 180 debt restructurings – for both sovereign bonds and sovereign syndicated bank loans – this column argues that the roughly 75% ‘haircut’ Argentina imposed on its creditors in 2005 was an outlier. Greece’s ‘haircut’ of roughly 64% in 2012, by contrast, was in line with previous experience.
Recessions can lead to an increase in youth unemployment, which could later negatively affect labour market outcomes. This column explores the effect of recessions on criminal activity. The findings indicate a substantial effect on initiating and forming youth careers. There is initially strong and eventually long-lasting detrimental effect of entering the labour market during a recession for individuals at the threshold of criminal activity. These effects are economically substantial and potentially more disturbing than short-run effects.
Other Recent Columns:
- Politics and regional allocation of public investments
- Post-Crisis banking regulation: Evolution of economic thinking as it happened on Vox
- Changes to the Bank of England’s monetary policy meetings
- ECB minutes: What they really tell us
- Assessing compliance with the Stability and Growth Pact’s rules
- Labour market reforms and international imbalances
- Serfdom and Russian economic development
- The Great Recession was not so Great
- Debt and fiscal adjustment: Historical evidence
- Credit supply and the housing boom
- Liquidity risk and systemic banking crises
- Fiscal multipliers and Eurozone consolidation
- Jewish persecution and distrust in finance
- Causes of the 2014 oil price decline
- The cost of delaying action to stem climate change: A meta-analysis
- The labour market difficulties of a Muslim minority
- Why the taxpayer is on the hook
- Defining ‘responsible’ fiscal policy for Europe
- The cost competitiveness obsession
- China’s 21st century free trade zone